Lost renewables subsidies successfully claimed as human rights damages

13 February 2013 by David Hart KC

Ofgem (Gas & Electricity Markets Authority) v. Infinis) [2013] EWCA  Civ 70, Court of Appeal 13 Feburary 2013 read judgment, on appeal from decision of Lindblom J Read judgment and my previous post

This decision upholding an award of damages for a claim under Article 1 Protocol 1 (right to possessions) may seem rather straightforward to a non-lawyer. Infinis lost out on some subsidies because the regulator misunderstood a complex legal document.  It could not claim those subsidies any more, so it claimed and got damages from the regulator. But the relatively novel thing is that English law does not generally allow claims for damage caused by unlawful action by the state. And yet the Court of Appeal found it easy to dismiss the regulator’s appeal on this point.

Infinis operates two gas engines at landfills. It draws gas from the landfills, burns it in the engines and exports the energy thus generated to the grid. It claimed subsidies in the form of Renewables Obligation Certificates (ROCs) from 2009 onwards. Ofgem said that the gas engines were excluded from benefitting from the ROCs. Much of the judgment is taken up with construing the agreements under which the engines were built, and whether they amounted to “an extant qualifying arrangement [which] provides for the building of a generating station” under the relevant Orders. If there was, no ROCs. If not, then ROCs. Aficionados of the electricity industry will find [6] to [21] of Sullivan LJ’s judgment fascinating – others may not. For those who do not, the bottom line is that, for reasons fairly abstruse, Ofgem had misinterpreted the arrangements governing the regime, and its appeal against this finding was dismissed.

As I said above, English law does not contain some overarching principle that damages are payable when government or a regulator gets it wrong. You need a specific peg to attach it to, so, you might have a claim where the civil servant was guilty of misfeasance in public office (involving some sort of deliberate act), or breach of some specific statute which carries the right to damages, or where there is some breach of EU law, where different rules apply. But for an old-fashioned domestic cock-up without such features, no damages as a rule.

Hence the importance of the claim under A1P1. Below, there does not seem to have been any argument about it. But Ofgem said on appeal that, even if the non-accreditation of these engines was unlawful, there had been no breach of A1P1 because Infinis’s claim was not sufficiently established to amount to a possession for the purposes of A1P1.Ofgem said that as the ECtHR’s decision in Kopecky v Slovakia (2005) 41 EHRR 43, had made clear, an arguable claim or genuine dispute could not, without more, constitute a legitimate expectation protected by A1P1; for there to be such a legitimate expectation there would need to be either settled case law or a judicial declaration recognising the validity of claim, and prior to the judgment below there was no such decision.

The Court of Appeal was unimpressed by this. Sullivan LJ pointed out that in Kopecky the ECtHR considered the line of cases in which it had found that applicants did not have a “legitimate expectation” because it could not be said that they had a currently enforceable claim that was sufficiently established. The ECHR said that

There was a difference…. between a mere hope of restitution, however understandable that hope may be, and a “legitimate expectation”, which must be of a nature more concrete than a mere hope and be based on a legal provision or a legal act such as a judicial decision.”

But as the CA said, the claim here was not based upon a mere hope of restitution; it was based on a legal provision, namely the right to accreditation which Ofgem had denied. Either such a provision or a legal act would found such a claim for damages.

To get damages under s.8(3) of the HRA, the court must be satisfied that the award is necessary to afford just satisfaction to the claimant, and under s.8(4) it must look to Strasbourg for guidance on that. But, as I pointed out previously, Strasbourg does not help much on damages – the more cases you look at, the less you think that there is any principle concerning these awards. There are statements of principle, but then they don’t seem to be followed through to the result, with words like “just and equitable” being used instead of analysis. One mantra used in Strasbourg a lot, however, is a bit of Latin “restitutio in integrum” – putting you where you would have been, but for the wrong done to you. And that, said Infinis, and the judge, gave Infinis the value of the ROCs, which they would have got had they been accredited.

Ofgem said – no, in fact human rights have different rules for damages, relying on the leading case of  Anufrijeva v Southwark LBC [2004] QB 1124.

But the CA quoted back the following from Anufrijeva: 

The fundamental principle underlying the award of compensation is that the court should achieve what it describes as restitution in integrum. The applicant should, in so far as this is possible, be placed in the same position as if his Convention rights had not been infringed. Where the breach of a Convention right has clearly caused significant pecuniary loss, this will usually be assessed and awarded. The awards of compensation to homosexuals, discharged from the armed forces, in breach of article 8, for loss of earnings and pension rights in Lustig-Prean and Beckett v United Kingdom (2000) 31 EHRR 601″ and Smith and Grady v United Kingdom (2000) 31 EHRR 620 are good examples of this approach. The problem arises in relation to the consequences of the breach of a Convention right which are not capable of being computed in terms of financial loss.

The CA focussed on the underlined words. Ofgem may be right when the question was how to decide how much, if anything, to award to someone for non-pecuniary loss (say, for an invasion of privacy or unlawful detention), but where the losses were capable of being computed in terms of financial loss, there was no reason why those losses should not be awarded.

And this finding did not come cheap for Ofgem. The order below was for £93,454.38, with a further £2,656,743.84 subject to any further argument.

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